Buy Facebook stock because it is a “phenomenal, dominant company”, investor says

Facebook (Facebook Stock Quote, Chart, News NASDAQ:FB) keeps trucking along like a well-oiled machine, and the good times are far from over, according to Colin Stewart of JC Clarke Limited, who says that you can’t argue with a company that keeps growing revenues by 25 per cent.

“We really like the long-term economics of the business,” said Stewart, CEO and portfolio manager at JC Clarke, who spoke to BNN Bloomberg on Tuesday. “It’s a phenomenal, dominant company in the online advertising business along with Google, where it’s effectively a duopoly.”

“If you look at the long-term trends with more advertising dollars going online and away from traditional sources, these guys are very well positioned. They’ve also made a lot of acquisitions including things like Instagram and WhatsApp, properties that they probably haven’t fully monetized yet, and we think that there’s a lot of potential to do that over time,” Stewart says.

Facebook stock isn’t cheap, Stewart says…

“I wouldn’t call it a value stock or a cheap stock but it’s really not all that expensive for a company that’s growing its top line at 25 per cent-plus — it’s a huge company and it’s pretty remarkable that they’ve been able to do that give their size,” he says.

By all accounts, Facebook has had a superb year, climbing from a low of $128.56 per share at the start of January to where it recently broke through the $200 mark —that’s a 55 per cent increase in value in 11 months- and the stock has yet to return to its all-time high of $218 per share hit back in the summer of 2018.

Facebook beat analysts estimates in its latest earnings report, delivered in late October, where it posted revenue of $17.65 billion in comparison to the $17.37 billion consensus forecast and earnings of $2.12 per share compared to the expected $1.91 per share. (All figures in US dollars.)

That top line represents a 29-per-cent growth rate, with the company growing its user base internationally and even domestically where the social media company attracted 189 million monthly users in Canada and the United States, up from 187 million during the previous quarter.

“We had a good quarter and our community and business continue to grow,” said CEO Mark Zuckerberg in Facebook’s quarterly press release. “We are focused on making progress on major social issues and building new experiences that improve people’s lives around the world.”

News broke this week that Facebook seems to have been thwarted in its attempt to buy health wearables company Fitbit by online ad competitor Google, which announced its intention on November 1 to buy Fitbit for $2.1 billion or $7.35 per share. Facebook reportedly had put in an offer for $7.30 per share.

Stewart says that investors should be looking for a good entry point on Facebook.

“There are some regulatory headwinds and a lot of negative press on [CEO] Mark Zuckerberg and the dominance of companies like Facebook but I think that over time that will resolve itself,” Stewart says.

“We’ve owned it in our portfolios but we don’t own it right now. The stock has had a good run here so we’ve trimmed our position,” he says. “It’s one of those things that if you get a pullback in the market, we would look to add to a company like that.”